Cyprus' parliament rejects tax on bank deposits

Cypriot lawmakers have overwhelmingly rejected a plan to seize up to 9.9 percent of people's bank deposits in order to secure an international bailout worth €10 billion (£8.66 billion).

Of the 56-seat parliament, 36 voted against and 19 abstained. One member was absent for the vote.

The decision leaves the small Mediterranean island on the precipice of financial uncertainty, although hundreds of anti-bailout protesters in Cyprus' capital Nicosia cheered and sang the national anthem when they heard the bill had failed.

Anti-bailout protesters smiled and cheered as news of the vote came through. Credit: REUTERS/Yorgos Karahalis

The plan that was rejected had been amended to shield the smallest depositors - those with under €20,000 (£17,051) in the bank. But savers with deposits up to €100,000 (£85,259) are supposed to be insured by all eurozone countries.

There has been widespread condemnation of the plan throughout Europe since it was announced over the weekend.

In the early hours of Saturday morning, the eurozone finance ministers pledged to provide €10 billion (£8.66 billion) in rescue loans if Cyprus can come up with the remainder of the €15.8 billion it needs to prevent its banks from failing.

With the country's banks closed since Saturday to avoid a run, Cyprus' political leaders will meet tomorrow in a bid to find a more politically palatable plan that might also satisfy officials in the eurozone and the International Monetary Fund.

After the vote, the European Central Bank said it would continue providing liquidity to Cypriot banks to prevent their immediate collapse "within the existing rules".

"In a situation like this, when an insolvency looms, then the creditors have to participate if they want to avoid an insolvency", Mr Schaeuble told Germany's ZDF television. "If you want to avoid that, then the investors in the bank have to make a corresponding contribution. Whether that's a 'bail in' or a levy, that's for Cyprus to decide itself".

Cyprus' Finance Minister Michalis Sarris has travelled to Moscow to discuss financial aid with his Russian counterpart while President Nico Anastasiades spoke with President Vladimir Putin after the vote.